NEED
TO KNOW - MORTGAGE INFORMATION

Simple mistakes are easily corrected by writing to the reporting company,
pointing out the error, and providing proof of the mistake. You can also
request to have your own comments added to explain problems. For example,
if you made a payment late due to illness, explain that for the record.
Lenders are usually understanding about legitimate problems.

WHAT IS A CREDIT BUREAU SCORE AND HOW DO LENDERS USE THEM?

A credit bureau score is a number, based upon your credit history that
represents the possibility that you will be unable to repay a loan. Lenders
use it to determine your ability to qualify for a mortgage loan. The better
the score, the better your chances are of getting a loan. Ask your lender
for details.

HOW CAN I IMPROVE MY SCORE?

There are no easy ways to improve your credit score, but you can work
to keep it acceptable by maintaining a good credit history. This means
paying your bills on time and not overextending yourself by buying more
than you can afford.

PART VI. FINDING THE RIGHT LOAN FOR YOU

HOW DO I CHOOSE THE BEST LOAN PROGRAM FOR ME?

Your personal situation will determine the best kind of loan for you.
By asking yourself a few questions, you can help narrow your search among
the many options available and discover which loan suits you best.

Do you expect your finances to changeover the next few years?
Are you planning to live in this home for a long period of time?
Are you comfortable with the idea of a changing mortgage payment amount?
Do you wish to be free of mortgage debt as your children approach college
age or as you prepare for retirement?
Your lender can help you use your answers to questions such as these to
decide which loan best fits your needs.

WHAT IS THE BEST WAY TO COMPARE LOAN TERMS BETWEEN LENDERS?

First, devise a checklist for the information from each lending institution.
You should include the company's name and basic information, the type
of mortgage, minimum down payment required, interest rate and points,
closing costs, loan processing time, and whether prepayment is allowed.

Speak with companies by phone or in person. Be sure to call every lender
on the list the same day, as interest rates can fluctuate daily. In addition
to doing your own research, your real estate agent may have access to
a database of lender and mortgage options. Though your agent may primarily
be affiliated with a particular lending institution, he or she may also
be able to suggest a variety of different lender options to you.

ARE THERE ANY COSTS OR FEES ASSOCIATED WITH THE LOAN ORIGINATION
PROCESS?

Yes. When you turn in your application, you'll be required to pay a loan
application fee to cover the costs of underwriting the loan. This fee
pays for the home appraisal, a copy of your credit report, and any additional
charges that may be necessary. The application fee is generally non-refundable.

WHAT IS RESPA?

RESPA stands for Real Estate Settlement Procedures Act. It requires lenders
to disclose information to potential customers throughout the mortgage
process. By doing so, it protects borrowers from abuses by lending institutions.
RESPA mandates that lenders fully inform borrowers about all closing costs,
lender servicing and escrow account practices, and business relationships
between closing service providers and other parties to the transaction.

For more information on RESPA, visit the web page at http://www.hud.gov/offices/hsg/sfh/res/respa_hm.cfm
or call 1-800-217-6970 for a local counseling referral.

WHAT IS A GOOD FAITH ESTIMATE, AND HOW DOES IT HELP ME?

It's an estimate that lists all fees paid before closing, all closing
costs, and any escrow costs you will encounter when purchasing a home.
The lender must supply it within three days of your application so that
you can make accurate judgments when shopping for a loan.

BESIDES RESPA, DOES THE LENDER HAVE ANY ADDITIONAL RESPONSIBILITIES?

Lenders are not allowed to discriminate in any way against potential
borrowers. If you believe a lender is refusing to provide his or her services
to you on the basis of race, color, nationality, religion, sex, familial
status, or disability, contact HUD's Office of Fair Housing at 1-800-669-9777
(or 1-800-927-9275 for the hearing impaired).

WHAT RESPONSIBILITIES DO I HAVE DURING THE LENDING PROCESS?

To ensure you won't fall victim to loan fraud, be sure to follow all
of these steps as you apply for a loan:

Be sure to read and understand everything before you sign.
Refuse to sign any blank documents.
Do not buy property for someone else.
Do not overstate your income.
Do not overstate how long you have been employed.
Do not overstate your assets.
Accurately report your debts.
Do not change your income tax returns for any reason.
Tell the whole truth about gifts.
Do not list fake co-borrowers on your loan application.
Be truthful I about your credit problems, past and present.
Be honest about your intention to occupy the house.
Do not provide false supporting documents.

PART VII. CLOSING

WHAT HAPPENS AFTER I HAVE APPLIED FOR A LOAN?

It usually takes a lender between 1-6 weeks to complete the evaluation
of your application. It's not unusual for the lender to ask for more information
once the application has been submitted. The sooner you can provide the
information, the faster your application will be processed. Once all the
information has been verified, the lender will call you to let you know
the outcome of your application. If the loan is approved, a closing date
is set up and the lender will review the closing process with you. And
after closing, you'll be able to move into your new home.

WHAT SHOULD I LOOK OUT FOR DURING THE FINAL WALK-THROUGH?

This will likely be the first opportunity to examine the house without
furniture, giving you a clear view of everything. Check the walls and
ceilings carefully, as well as any work the seller agreed to do in response
to the inspection. Any problems discovered previously that you find uncorrected
should be brought up prior to closing. It is the seller's responsibility
to fix them.

WHAT MAKE UP CLOSING COSTS?

There may be closing costs customary or unique to a certain locality,
but closing costs are usually made up of the following:

You'll present your paid homeowner's insurance policy or a binder and
receipt showing that the premium has been paid. The closing agent will
then list the money you owe the seller (remainder of down payment, prepaid
taxes, etc.) and then the money the seller owes you (unpaid taxes and
prepaid rent, if applicable). The seller will provide proofs of any inspection,
warranties, etc.

Once you're sure you understand all the documentation, you'll sign the
mortgage, agreeing that if you don't make payments the lender is entitled
to sell your property and apply the sale price against the amount you
owe plus expenses. You'll also sign a mortgage note, promising to repay
the loan. The seller will give you the title to the house in the form
of a signed deed.

You'll pay the lender's agent all closing costs and, in turn, he or she
will provide you with a settlement statement of all the items for which
you have paid. The deed and mortgage will then be recorded in the state
Registry of Deeds, and you will be a homeowner.

WHAT DO I GET AT CLOSING?

Settlement Statement, HUD-1 Form (itemizes services provided and the
fees charged; it is filled out by the closing agent and must be given
to you at or before closing)
Truth-in-Lending Statement
Mortgage Note
Mortgage or Deed of Trust
Binding Sales Contract (prepared by the seller; your lawyer should review
it)
Keys to your new home

PART VIII. CAN HUD AND THE FHA HELP ME BECOME A HOMEOWNER?

WHAT IS THE U.S. DEPARTMENT OF HOUING AND URBAN DEVELOPMENT?

Also known as HUD, the U.S. Department of Housing and Urban Development
was established in 1965 to develop national policies and programs to address
housing needs in the U.S. One of HUD's primary missions is to create a
suitable living environment for all Americans by developing and improving
the country's communities and enforcing fair housing laws.

HOW DOES HUD HELP HOMEBUYERS AND HOMEOWNERS ?

HUD helps people by administering a variety of programs that develop
and support affordable housing. Specifically, HUD plays a large role in
homeownership by making loans available for lower- and moderate-income
families through its FHA mortgage insurance program and its HUD Homes
program. HUD owns homes in many communities throughout the U.S. and offers
them for sale at attractive prices and economical terms. HUD also seeks
to protect consumers through education, Fair Housing Laws, and rehabilitation
initiatives.

WHAT IS THE FHA?

Now an agency within HUD, the Federal Housing Administration was established
in 1934 to advance opportunities for Americans to own homes. By providing
private lenders with mortgage insurance, the FHA gives them the security
they need to lend to first-time buyers who might not be able to qualify
for conventional loans. The FHA has helped more than 26 million Americans
buy a home.

HOW CAN THE FHA ASSIST ME IN BUYING A HOME?

The FHA works to make homeownership a possibility for more Americans.
With the FHA, you don't need perfect credit or a high-paying job to qualify
for a loan. The FHA also makes loans more accessible by requiring smaller
down payments than conventional loans. In fact, an FHA down payment could
be as little as a few months' rent. And your monthly payments may not
be much more than rent.

HOW IS THE FHA FUNDED?

Lender claims paid by the FHA mortgage insurance program are drawn from
the Mutual Mortgage Insurance fund. This fund is made up of premiums paid
by FHA-insured loan borrowers. No tax dollars are used to fund the program.

WHO CAN QUALIFY FOR FHA LOANS?

Anyone who meets the credit requirements, can afford the mortgage payments
and cash investment, and who plans to use the mortgaged property as a
primary residence may apply for an FHA-insured loan.

WHAT IS THE FHA LOAN LIMIT?

FHA loan limits vary throughout the country, from $115,200 in low-cost
areas to $208,800 in highcost areas. The loan maximums for multi-unit
homes are higher than those for single units and also vary by area.

Because these maximums are linked to the conforming loan limit and average
area home prices, FHA loan limits are periodically subject to change.
Ask your lender for details and confirmation of current limits.

WHAT ARE THE STEPS INVOLVED IN THE FHA LOAN PROCESS?

With the exception of a few additional forms, the FHA loan application
process is similar to that of a conventional loan (see Question 47). With
new automation measures, FHA loans may be originated more quickly than
before. And, if you don't prefer a face-to-face meeting, you can apply
for an FHA loan via mail, telephone, the Internet, or video conference.

HOW MUCH INCOME DO I NEED TO HAVE TO QUALIFY FOR AN FHA LOAN?

There is no minimum income requirement. But you must prove steady income
for at least three years, and demonstrate that you've consistently paid
your bills on time.

WHAT QUALIFIES AS AN INCOME SOURCE FOR THE FHA?

Seasonal pay, child support, retirement pension payments, unemployment
compensation, VA benefits, military pay, Social Security income, alimony,
and rent paid by family all qualify as income sources. Part-time pay,
overtime, and bonus pay also count as long as they are steady. Special
savings plans-such as those set up by a church or community association
- qualify, too. Income type is not as important as income steadiness with
the FHA.

CAN I CARRY DEBT AND STILL QUALIFY FOR FHA LOANS?

Yes. Short-term debt doesn't count as long as it can be paid off within
10 months. And some regular expenses, like child care costs, are not considered
debt. Talk to your lender or real estate agent about meeting the FHA debt-to-Income
ratio.

WHAT IS THE DEBT-TO-INCOME RATIO FOR FHA LOANS?

The FHA allows you to use 29% of you income towards housing costs and
41% towards housing expenses and other long-tem debt. With a conventional
loan, this qualifying ratio allows only 28% toward housing and 36% towards
housing and other debt.

CAN I EXCEED THE RATIO?

You may qualify to exceed if you have:

A large down payment
A demonstrated ability to pay more toward you housing expenses
Substantial cash reserves
Net worth enough to repay the mortgage regardless of income
Evidence of acceptable credit history or limited credit use
Less-than-maximum mortgage terms
Funds provided by an organization
A decrease in monthly housing expenses
HOW LARGE A DOWN PAYMENT DO I NEED WITH AN FHA LOAN?

You must have a down payment of at least 3% of the purchase price of
the home. Most affordable loan programs offered by private lenders require
between a 3% - 5% down payment, with a minimum of 3% coming directly from
the borrower's own funds.

WHAT CAN I USE TO PAY THE DOWN PAYMENT AND CLOSING COSTS OF AN FHA
LOAN?

Besides your own funds, you may use cash gifts or money from a private
savings club. If you can do certain repairs and improvements yourself,
your labor may be used as part of a down payment (called "sweat equity").
If you are doing a lease purchase, paying extra rent to the seller may
also be considered the same as accumulating cash.

HOW DOES MY CREDIT HISTORY IMPACT MY ABILITY TO QUALIFY?

The FHA is generally more flexible than conventional lenders in its qualifying
guidelines. In fact, the FHA allows you to re-establish credit if:

two years have passed since a bankruptcy has been discharged
all judgments have been paid
any outstanding tax liens have been satisfied or appropriate arrangements
have been made to establish a repayment plan with the IRS or state Department
of Revenue
three years have passed since a foreclosure or a deed-in-lieu has been
resolved
CAN I QUALIFY FOR AN FHA LOAN WITHOUT A CREDIT HISTORY?

Yes. If you prefer to pay debts in cash or are too young to have established
credit, there are other ways to prove your eligibility. Talk to your lender
for details.

WHAT TYPES OF CLOSING COSTS ARE ASSOCIATED WITH FHA-INSURED LOANS?

Except for the addition of an FHA mortgage insurance premium, FHA closing
costs are similar to those of a conventional loan outlined in Question
63. The FHA requires a single, up-front mortgage insurance premium equal
to 2.25% of the mortgage to be paid at closing (or 1.75% if you complete
the HELP program- see Question 91). This initial premium may be partially
refunded if the loan is paid in full during the first seven years of the
loan term. After closing, you will then be responsible for an annual premium
- paid monthly - if your mortgage is over 15 years or if you have a 15-year
loan with an LTV greater than 90%.

CAN I ROLL CLOSING COSTS INTO MY FHA LOAN?

No. Though you can't roll closing costs into your FHA loan, you may be
able to use the amount you pay for them to help satisfy the down payment
requirement. Ask your lender for details.

ARE FHA LOANS ASSUMABLE?

Yes. You can assume an existing FHA-Insured loan, or, if you are the
one deciding to sell, allow a buyer to assume yours. Assuming a loan can
be very beneficial, since the process is stream lined and less expensive
compared to that for a new loan. Also, assuming a loan can often result
in a lower interest rate. The application process consists basically of
a credit check and no property appraisal is required. And you must demonstrate
that you have enough income to support the mortgage loan. In this way,
qualifying to assume a loan is similar to the qualification requirements
for a new one.

WHAT SHOULD I DO IF I CAN'T MAKE A PAYMENT ON MY LOAN?

Call or write to your lender as soon as possible. Clearly explain the
situation and be prepared to provide him or her with financial information.

ARE THERE ANY OPTIONS IF I FALL BEHIND ON MY LOAN PAYMENTS?

Yes. Talk to your lender or a HUD-approved counseling agency for details.
Listed below are a few options that may help you get back on track.

For FHA loans:

Keep living in your home to qualify for assistance.
Contact a HUD-approved housing counseling agency (1-800-569-4287 or TDD:
1-800-877-8339) and cooperate with the counselor/lender trying to help
you.
HUD has a number of special loss mitigation programs available to help
you:
Special Forbearance: Your lender will arrange for a revised repayment
plan which may include temporary reduction or suspension of payments;
you can qualify by having an involuntary reduction in your income or increase
in living expenses.
Mortgage Modification: Allows you to refinance debt and/or extend the
term of the mortgage loan which may reduce your monthly payments; you
can qualify if you have recovered from financial problems, but net income
is less than before.
Partial Claim: Your lender may be able to help you obtain an interest-free
loan from HUD to bring your mortgage current.
Pre-foreclosure Sale: Allows you to sell your property and pay off your
mortgage loan to avoid foreclosure.
Deed-in-lieu of Foreclosure: Lets you voluntarily "give back"
your property to the lender; it won't save your house but will help you
avoid the costs, time, and effort of the foreclosure process.
If you are having difficulty with an uncooperative lender or feel your
loan servicer is not providing you with the most effective loss mitigation
options, call the FHA Loss Mitigation Center at 1-888-297-8685 for additional
help.
For conventional loans:

Talk to your lender about specific loss mitigation options. Work directly
with him or her to request a "workout packet." A secondary lender,
like Fannie Mae or Freddie Mac, may have purchased your loan. Your lender
can follow the appropriate guidelines set by Fannie or Freddie to determine
the best option for your situation.

Fannie Mae does not deal directly with the borrower. They work with the
lender to determine the loss mitigation program that best fits your needs.

Freddie Mac, like Fannie Mae, will usually only work with the loan servicer.
However, if you encounter problems with your lender during the loss mitigation
process, you can call customer service for help at 1-800-FREDDIE (1-800-373-3343).

In any loss mitigation situation, it is important to remember a few helpful
hints:

Explore every reasonable alternative to avoid losing your home, but beware
of scams.
For example, watch out for: Equity skimming: a buyer offers to repay the
mortgage or sell the property if you sign over the deed and move out.
Phony counseling agencies: offer counseling for a fee when it is often
given at no charge.

Don't sign anything you don't understand.

PART IX. MORTGAGE INSURANCE

WHAT IS MORTGAGE INSURANCE?

Mortgage insurance is a policy that protects lenders against some or
most of the losses that result from defaults on home mortgages. It's required
primarily for borrowers making a down payment of less than 20%.

HOW DOES MORTGAGE INSURANCE WORK? IS IT LIKE HOME OR AUTO INSURANCE?

Like home or auto insurance, mortgage insurance requires payment of a
premium, is for protection against loss, and is used in the event of an
emergency. If a borrower can't repay an insured mortgage loan as agreed,
the lender may foreclose on the property and file a claim with the mortgage
insurer for some or most of the total losses.

DO I NEED MORTGAGE INSURANCE? HOW DO I GET IT?

You need mortgage insurance only if you plan to make a down payment of
less than 20% of the purchase price of the home. The FHA offers several
loan programs that may meet your needs. Ask your lender for details.

HOW CAN I RECEIVE A DISCOUNT ON THE FHA INITIAL MORTGAGE INSURANCE
PREMIUM?

Ask your real estate agent or lender for information on the HELP program
from the FHA.

HELP - Homebuyer Education Learning Program - is structured to help people
like you begin the homebuying process. It covers such topics as budgeting,
finding a home, getting a loan, and home maintenance. In most cases, completion
of this program may entitle you to a reduction in the initial FHA mortgage
insurance premium from 2.25% to 1.75% of the purchase price of your new
home.

WHAT IS PMI?

PMI stands for Private Mortgage Insurance or Insurer. These are privately-owned
companies that provide mortgage insurance. They offer both standard and
special affordable programs for borrowers. These companies provide guidelines
to lenders that detail the types of loans they will insure. Lenders use
these guidelines to determine borrower eligibility. PMI's usually have
stricter qualifying ratios and larger down payment requirements than the
FHA, but their premiums are often lower and they insure loans that exceed
the FHA limit.

PART X. FHA PRODUCTS

WHAT IS A 203(b) LOAN?

This is the most commonly used FHA program. It offers a low down payment,
flexible qualifying guidelines, limited lender's fees, and a maximum loan
amount.

WHAT IS A 203(k) LOAN?

This is a loan that enables the homebuyer to finance both the purchase
and rehabilitation of a home through a single mortgage. A portion of the
loan is used to pay off the seller's existing mortgage and the remainder
is placed in an escrow account and released as rehabilitation is completed.
Basic guidelines for 203(k) loans are as follows:

The home must be at least one year old.
The cost of rehabilitation must be at least $5,000, but the total property
value-including the cost of repairs-must fall within the FHA maximum mortgage
limit.
The 203(k) loan must follow many of the 203(b) eligibility requirements.
Talk to your lender about specific improvement, energy efficiency, and
structural guidelines.
95. WHAT IS AN ENERGY EFFICIENT MORTGAGE (EEM)?

The Energy Efficient Mortgage allows a homebuyer to save future money
on utility bills. This is done by financing the cost of adding energy-efficiency
features to a new or existing home as part of an FHA-insured home purchase.
The EEM can be used with both 203(b) and 203(k) loans. Basic guidelines
for EEMs are as follows:

The cost of improvements must be determined by a Home Energy Rating System
or by an energy consultant. This cost must be less than the anticipated
savings from the improvements.
One- and two-unit new or existing homes are eligible; condos are not.
The improvements financed may be 5% of property value or $4,000, whichever
is greater. The total must fall within the FHA loan limit.
96. DELETED

WHAT IS A TITLE I LOAN?

Given by a lender and insured by the FHA, a Title I loan is used to make
non-luxury renovations and repairs to a home. It offers a manageable interest
rate and repayment schedule. Loans are limited to between $5,000 and $20,000.
If the loan amount is under $7,500, no lien is required against your home.
Ask your lender for details.

WHAT OTHER LOAN PRODUCTS OR PROGRAMS DOES THE FHA OFFER?

The FHA also insures loans for the purchase or rehabilitation of manufactured
housing, condominiums, and cooperatives. It also has special programs
for urban areas, disaster victims, and members of the armed forces. Insurance
for ARMs is also available from the FHA.

HOW CAN I OBTAIN AN FHA-INSURED LOAN?

Contact any lender such as a participating mortgage company, bank, savings
and loan association, or thrift. For more information on the FHA and how
you can obtain an FHA loan, visit the HUD web site at http://www.hud.gov
or call a HUD-approved counseling agency at 1-800-569-4287 or TDD: 1-800-877-8339.

HOW CAN I CONTACT HUD?

Visit the web site at http://www.hud.gov or look in the phone book "blue
pages" for a listing of the HUD office near you.